A key component of New Federalism Fund's efforts will be conveying to lawmakers in Congress how the industry operates, contributes revenue to state and local coffers and serves as a source of employment. Pictured: People walk past the U.S. Capitol on February 28, 2017 in Washington, D.C. (Brendan Smialowski, AFP/Getty Images)

Powerhouse cannabis firms form lobby group to protect state-based weed laws

Some big-name firms in cannabis have formed a national advocacy and lobbying organization with an aim of turning big bucks into big changes for marijuana on Capitol Hill.

Denver-based dispensary powerhouse LivWell Enlightened Health and lawn-and-garden giant Scotts Miracle-Gro are among the founding board members of New Federalism Fund, a non-partisan 501(c)4 organization backing state-based regulatory systems for marijuana and policies to change federal tax and banking laws to better those systems.

Other founding board members include Dixie Elixirs, a Denver-based cannabis products company; Privateer Holdings, a Seattle-based marijuana private equity firm; Tryke Companies, a Tempe, Ariz.-based medical cannabis business; and Denver dispensary operators Native Roots and Medicine Man.

The launch of New Federalism Fund, or NFF, comes in the wake of White House spokesman Sean Spicer and Attorney General Jeff Sessions making unfavorable remarks toward the flurry of state-regulated legal marijuana programs.

“It’s really vitally important that we try to engage in a productive way and tell our story and try to educate the government,” Neal Levine, LivWell’s senior vice president of government affairs and spokesman for the NFF, told The Cannabist.

NFF’s priorities include protecting the state-based legal marijuana programs, limiting the use of enforcement resources on those systems, changing federal tax law to ensure that cannabis businesses are not penalized by IRS Code 280E, and promoting federal-level actions that would allow for cannabis businesses to openly bank.

A key component of NFF’s efforts will be conveying how the industry operates, contributes revenue to state and local coffers, serves as a source of employment, and offers a regulated means to pull the drug from the black market, Levine said.

“Let’s all agree, if we can, that marijuana is not going to be eradicated off the face of the Earth … we’re the solution to your drug cartel problem when it comes to marijuana,” he said.

The Internal Revenue Service classifies 501(c)4 groups as “social welfare organizations.” They can advocate for social causes and also engage in some political activity — so long as it is not the primary source for its funds, according to the IRS.

The Washington Post breaks that down in simpler terms in its Q&A-style explainer of the classification:

What that means in practice is that they must spend less than 50 percent of their money on politics. So long as they don’t run afoul of that threshold, the groups can influence elections, which they typically do through advertising.

There are no limits on the size of the contributions that can be made to 501(c)4s, according to the Center for Responsive Politics’ OpenSecrets.org.

It’s undetermined how much NFF intends to or could raise, Levine said, adding that the organization expects to wield a “significant amount” of money — into the seven figures “at least.”

As a 501(c)4, NFF can supplement the work of other organizations such as trade group the National Cannabis Industry Association, of which Levine is a board member, he said.

“We’re not getting involved in a federal legalization debate,” he said. “We are focusing on the federalism aspect of an unfair tax policy.”

IRS Code 280E disallows credits and business deductions for income generated from the sale of controlled substances, which is how the federal government classifies cannabis.